The world's largest shoe manufacturer has reported relatively stable profit margins for its latest financial year, which was stretched to 15 months, ending last Dec. 31, to make it coincide with the calendar year. Rises in raw material costs and factory wages, which are partly based on the workers' performance, were smaller than in previous years, says Yue Yuen, adding that most of its shoe production is now based outside Mainland China. The group employed a total of 423,000 people at the end of last year.
Yue Yuen produced a total of 393.3 million pairs of shoes during the 15-month period, compared with 326.6 million in the 12 months ended in September 2011, and sold them to its clients at an average price per pair of US$16.30, 7 percent higher than the US$15.31 average of the previous period. Major customers were careful in placing their orders, Yue Yuen noted.
The manufacture of athletic shoes represented 51.6 percent of its total turnover of US$9,193.2 million last year, down from 52.2 percent in the previous period, while the share held by casual and outdoor shoes declined to 17.0 percent from 17.6 percent. Instead, the group's retail sales, which are represented essentially by Pou Sheng, grew to 22.3 percent of the total turnover from 20.3 percent in the previous financial year.
The number of directly operated stores or counters in Mainland China stood at 3,659 at the end of last year, up from 3,055 at the end of the previous year. The group also had 2,276 sub-distributors in Greater China, and they were down significantly from the previous level of 3,357 due to the expiration of an exclusive license with Converse at the end of 2011.
Retail sales benefitted from acquisitions and were nearly flat on a comparable store basis. The company indicated that the retail segment posted a loss because of high staff and rental costs, but predicted that it will gradually return to profitability thanks to improved sales strategies and inventory management.
Geographically, Asia absorbed 42.5 percent of the total manufacturing and retail turnover, up from 40.8 percent in the previous fiscal year, and the group sold also a little more in South America. Sales in the U.S. and Europe shrank slightly to 28.1 and 20.2 percent of the total, respectively.
The company reduced slightly the number of production lines in operation to 522 at the end of last December from 537 in September 2011. It spent $208.6 million in product development, $82.3 million in new factory buildings, $21.4 million in other buildings and properties, and $168.3 million on machinery and leasehold improvements.
The financial results most recently reported by the company for the 15-month period are not directly comparable with those of its previous financial year, which ran from October 2010 to September 2011. On a pro forma basis, factoring in the results of the 15 months ended in December 2011, the group's sales went up by 2.63 percent last year. Operating earnings dropped by 3.80 percent to $583.1 million and net earnings increased by 2.96 percent to $623.7 million.
